Sector Snap: Restaurant chains mixed after report

NEW YORK (AP) -- Shares of restaurant chains were mixed Wednesday after a Wedbush analyst noted that some were better positioned to weather the impact of rising costs for ingredients and new health care regulations.

Analyst Nick Setyan noted that transaction growth in the industry is likely to remain muted next year, limiting the ability of restaurant chains to raise prices to offset rising commodity and health care costs.

He said he anticipates margins could be impacted by between 1 percent and 3 percent from new health care regulations, which will require large businesses to provide coverage to workers starting in 2014. Setyan noted that companies with more franchised locations, such as Dunkin Donuts' parent company Dunkin' Brands Group Inc., will not be as impacted as those with more company-owned locations.

Dunkin's shares were up 34 cents, or 1 percent, at $33.16.

Setyan also noted that Panera is self-insured, making it best positioned to avoid impact from the regulations. He upgraded the fast-casual chain to "Outperform" from "Neutral," also citing its potential for sustained sales growth at restaurants open at least a year. The metric is a key gauge because it strips out the impact of newly opened and closed locations.

The chain's shares were up $2.15, or about 1 percent, at $168.16.

Meanwhile, he downgraded BJ's Restaurants Inc. to "Neutral," from "Outperform," noting the impact of health care legislation, combined with muted sales trends that could limit its ability to offset costs with higher menu prices. The chain's stock was down 77 cents, or about 2 percent, at $34.42.

As for commodity costs, Setyan said he expects inflation of 3.1 percent in 2013. He said Buffalo Wild Wings Inc., Jack in the Box Inc., Panera and Krispy Kreme Doughnuts Inc. at the low end of the range, and Chipotle Mexican Grill and BJ's at the high end.

Buffalo Wild Wings was down 20 cents at $75.61. Jack in the Box was down 8 cents at $28.91. Shares of Chipotle were down $2.98, or almost 1 percent, at $290.78.